A Russian Perspective on the Impact of Sanctions

Summary: In order to force Pyongyang to abandon its nuclear and missiles programs, the international community has imposed a set of tough economic sanctions. Do they work? And what Moscow thinks about them?

The situation on the Korean Peninsula is moving in a dangerous direction. In order to affect the behavior of the North Korean regime and change its calculations, ultimately forcing Pyongyang to abandon its nuclear and missiles programs, the international community has imposed a set of tough economic sanctions. The recent set of sanctions was codified in the UN Security Council Resolution 2321. So far, the impact of these and other sanctions in order to change the DPRK’s actions appears to be limited. Russia is one of the active players on the Korean Peninsula. A geographical neighbor of the DPRK and a former Cold War ally, Russia is engaged in looking for solutions to the North Korean nuclear problem. Still, when it comes to economic sanctions against North Korea, Moscow has an ambiguous position. Its national interests on the Korean Peninsula include prevention of nuclear tests by the DPRK, positioning Russia as one of the leaders of the international community on nonproliferation; non-expansion of the U.S. military presence on the Korean Peninsula; and growth in Russian trade with both Korean states. The sanctions envisaged in Resolution 2321 do not support most of these goals, since Russia thinks that nuclear disarmament of DPRK is impossible in principle. However, Moscow is ready to play along with the sanctions track as long as Russia maintains the appearance of a critical player.

On February 12, 2017 North Korea conducted a live-fire test of a new type of strategic missile. The test of Pukgusong-2 was presided over by DPRK leader Kim Jong-un. According to the state-run Korean Central News Agency, the missile has a “medium to long range” and “can be tipped with a nuclear warhead.”1 The test has sparked international condemnation, with Japan and the United States coming out as the most vocal supporters of harsh penalties for the DPRK. Japanese representatives have called for a new round of tougher economic sanctions against the DPRK, and called on China to “respond constructively.” Various countries around the world have condemned the tests, and a UN Security Council meeting was called to review the situation.

One of the strongest unannounced messages sent by the February 12 missile launch was the inefficiency of various approaches that the international community has tried to stop the North Korean missile problem. The latest powerful move was UNSC Resolution 2321 adopted on November 30, 2016.;2; The resolution built on the toughest to date Resolution 22703 adopted on March 2, 2016 as a direct response to the nuclear test that Pyongyang conducted on January 6, 2016. The diplomats who enacted these sanctions in the UN have called them the “toughest ever” passed against the DPRK. The main aim of Resolution 2321 was to cut off potential channels for financing the nuclear and missile programs, as well as to put some significant economic pressure on the DPRK in order to make it return to the negotiating table and ultimately abandon both programs. The most powerful tool in the resolution’s toolkit was a ban on the purchase of North Korean coal, iron, iron ore, gold, titanium ore, vanadium ore, and rare earth minerals, copper, nickel, silver, zinc, new helicopters, and vessels, as well as statues. The only exception was made for coal, on which the resolution put strict limitations: Pyongyang is allowed to sell no more than $400,870,018 worth of coal or 7,500,000 metric tons per year, whichever is met first, beginning on January 1, 2017.

The resolution came as a result of fierce discussions in the UNSC, once again showing differences in approach towards the crisis by key external players, which include the United States, China, the ROK, Japan, and Russia. In agreeing on policy tools to deploy in the case of the DPRK’s provocative behavior, each of these players was guided by its own understanding of the root causes and dynamics of the North Korean nuclear crisis, as well as its stated (and, most importantly, unstated) national interests on the Korean Peninsula.

Russia was no exception to that rule. Though Russia does not possess the economic leverage over the DPRK that China has, and, unlike the United States, does not have significant military tools to tackle the issue or legal obligations to defend its allies, it is an important player on the Korean Peninsula in its own right. Its geographical border with the DPRK, permanent membership and veto power in the UNSC, as well as a unique combination of economic, military, and diplomatic interests in Northeast Asia make Russia a power to be reckoned with when framing policy towards DPRK.

This article assesses Russian national interests on the Korean Peninsula, disentangles Russian evaluations on sanctions efficacy, and explores the Russian debate on further steps to improve the options that the international community has to tackle the DPRK nuclear issue.

THE RUSSIAN VIEW ON THE NORTH KOREA NUCLEAR ISSUE

The starting point for any discussion on the Russian approach towards the North Korean nuclear problem must be a proper analysis of how it sees the origins of this problem, and assesses the potential solutions. This proves to be a challenging task since the Russian official position aired at the UN or in official statements is different from the consensus view in Moscow among decision-makers and members of the expert community.

The main, stated goal of Russian policy and diplomatic efforts on the Korean Peninsula has been denuclearization. The statement that the Russian Ministry of Foreign Affairs (MOFA) issued on December 1, 2016, right after Resolution 2321 was adopted, states that “this UN Security Council resolution should be a clear signal to the North Korean authorities to abandon their nuclear missile schemes and return to the non-proliferation framework.”4

This official position is also clearly stated in the fact that Russia has signed on to Resolution 2321, which states that the DPRK “shall abandon all nuclear weapons and existing nuclear programmes in a complete, verifiable and irreversible manner, and immediately cease all related activities; and shall abandon all other existing weapons of mass destruction and ballistic missile programmes in a complete, verifiable and irreversible manner” (paragraph 2). On top of this, Russia has included denuclearization of the Korean Peninsula in its newest version of the Foreign Policy Concept—the major strategic document outlining the Kremlin’s approach to foreign policy and international issues signed by President Vladimir Putin on November 30, 2016: “Russia has always championed a non-nuclear status for the Korean Peninsula and will support its denuclearization in every possible way, believing that this objective can be attained through the Six-Party Talks” (paragraph 89).5

However, the officially stated goal of denuclearization is not the one that the Kremlin considers realistic. Writings of Russian experts, panel discussions in Russia on the topic, and, most importantly, in-depth anonymous interviews with Russian officials and government advisors6 show that Moscow does not think denuclearization is possible.

The clearest explanation to date about why Moscow considers denuclearization in the Korean Peninsula a lost cause can be found in the writings of Andrei Lankov, professor of Korea studies at Kookmin University in Seoul and one of the best Russ ia-born specialists on the DPRK. Lankov’s position in the Russian expert community is unique. He is a Russian national and maintains contacts in the Korea-watching circles inside the government and academia, and, at the same time, he is an outsider residing in Seoul. This is why his analysis is not bound by the group thinking so frequent in Russian policy debates on the North Korean issue, but, at the same time, nor by the Kremlin’s official mantras of denuclearization the way many other Russian specialists are, given the subordinated state of Russian academia to the government. Lankov’s argument is best summarized in a recent op-ed for Al-Jazeera English.7

Kim is afraid of a U.S. invasion and—given what happened in Iraq, a fellow member of the so-called “axis of evil”, as well as in Libya—his fears are by no means paranoid. He believes that the best way to counter a foreign threat is to have a full-scale nuclear force which would be capable of hitting the continental U.S. He needs ICBMs, perhaps dozens of them, preferably on difficult-to-intercept mobile launchers, ready to be launched at short notice. Such force, Kim and his people hope, will ensure that the U.S. will not attack, and will not intervene in support of some internal revolution, should it erupt inside North Korea – like it happened in Libya.8

This approach reflects the consensus in Moscow, according to interviews with Russian officials and experts.9 The same view was expressed publicly by Georgy Toloraya, one of the leading Korea experts in Russia,10 the head of the Center for Russian Strategy in Asia at the Institute of the Economy, Russian Academy of Sciences. At the Carnegie Moscow Center on March 14, 2017, Toloraya stated that a nuclear deterrent is viewed in Pyongyang as “the only insurance that can guarantee regime survival,” and that Kim’s government will not stop unless it possesses a nuclear weapon capable of hitting the U.S. West Coast.11

The senior Russian leadership is convinced that the United States is pursuing a strategy of “color revolutions” and economic pressure to dispose of the regimes that America does not like. The North Korean regime, which was once labeled by President George W. Bush part of the “Axis of Evil,” falls into this category. Though the Kremlin was not fully sympathetic with the regimes of Saddam Hussein and Muammar Gaddafi, after the “color revolutions” in the post-Soviet space in 2003 (Georgia), 2004 (Ukraine), and 2005 (Kyrgyzstan), it is deeply suspicious of alleged U.S. intentions to foment popular uprisings. Moscow also believes that Washington is after regime change in Russia itself—these fears were cemented by the Maidan revolution in Ukraine in 2014. The only viable tool for an authoritarian regime, which can guarantee prevention of American military interference into domestic conflict, is possession of nuclear weapons.

The Kremlin has a somewhat ambivalent stand when it comes to North Korea. On the one hand, it is not happy about the emergence of a nuclear state on its border. Moscow does not believe that Pyongyang is developing nuclear and missile capabilities against Russia. But these developments have negative consequences for Russian security interests, because they give the United States a legitimate pretext to develop its military infrastructure on and around the Korean Peninsula, including the recent deployment of THAAD. This is the major reason why Moscow continues its efforts with other members of the international community to limit DPRK missile and nuclear capabilities. At the same time, Moscow is perfectly aware that Pyongyang will not give up its goal of developing a nuclear-capable ICBM. Thus, the major challenge for the Kremlin is to aggregate the conflicting national interests of Russia on the Korean Peninsula, check them against reality, and fuse them into a coherent agenda.

This task is proving to be extremely difficult, forcing Moscow to play a more reactive role and side with its major diplomatic partner in Northeast Asia: China.

RUSSIAN INTERESTS ON THE KOREAN PENINSULA

What are Russian national interests on the Korean Peninsula, related to the DPRK and its nuclear program? Analysis of the Russian expert community’s writings, as well as interviews with officials, reveals a complex picture with different and frequently competing agendas. Four major interests can be identified:

1) Nuclear security: prevention of nuclear and missile tests by the DPRK, as well as prevention of proliferation of nuclear and missiles technologies from the DPRK;

2) Military security: non-expansion of the U.S. military presence on the Korean Peninsula, prevention of THAAD deployment, or finding a military response to the growing U.S. military presence in the region;

3) Prestige: positioning Russia as one of the leaders of the international community on nonproliferation, playing a visible role in solving an important international crisis;

4) Economy: growth in Russian trade with the DPRK, as well as implementation of trilateral projects involving Russia, the DPRK, and the Republic of Korea.

Nuclear Security

The mainstream view in Russia is that the North Korean nuclear and missile arsenal will not pose a serious challenge for the security of Russia, particularly the Far East. Russian experts and officials alike are convinced that Pyongyang does not see Russia as a threat to its security, and, thus, the new weapon types will be directed against the United States and its allies. However, the risks posed to Russia by the DPRK’s nuclear program can be summarized in two main points.

i) Risks of accidents caused by backward technology used by North Korea. Populated areas of Primorski Krai, including the region’s capital Vladivostok with its one million inhabitants, are within striking distance of the DPRK’s missiles. Any technical failure may cause unintended damage to Russian territory and population. These fears, however, have grown less acute in recent months following changing analyses of the North’s capabilities. According to Russian assessments, the DPRK’s launch precision is improving dramatically, thus reducing the risk of a technical failure and related accident.

ii) Risks by proliferation of DPRK technologies to dangerous states and terrorist groups. This risk is seen by the Russian expert community as a much more serious threat to the country’s security than the unlikely use of nuclear arms by the DPRK regime. Forced by the sanctions to earn foreign currency through illegal means, Pyongyang might be tempted to sell its technologies on the black market (and is arguably doing this already), and, thus, dangerous weapons might end up in the wrong hands.

Military security

Expansion of U.S.-led military alliances was long ago identified as a key challenge to Russian national security. The legacy of the Cold War, NATO enlargement during the Clinton and George W. Bush administrations, failed negotiations on missile defense in Eastern Europe, and the recent schism with the West following the war in Ukraine have nurtured a consensus in the Russian foreign policy and national security elite that the United States poses an existential threat to Russia and the survival of the current regime.12 Prevention of U.S. military infrastructure approaching the Russian border is a national security priority. The most recent version of the Russian Military Doctrine adopted in December 2014, soon after the Crimea annexation and start of the war in Eastern Ukraine, lists several key risks associated with U.S. policies:13

i) Build-up of the power potential of the North Atlantic Treaty Organization (NATO) and vesting NATO with global functions carried out in violation of the rules of international law, bringing the military infrastructure of NATO member countries near the borders of the Russian Federation, including by further expansion of the alliance;

ii) Deployment (build-up) of military contingents of foreign states (groups of states) in the territories of the states contiguous with the Russian Federation and its allies, as well as in adjacent waters, including for exerting political and military pressure on the Russian Federation;

iii) Establishment and deployment of strategic missile defense systems undermining global stability and violating the established balance of forces related to nuclear missiles, implementation of the global strike concept, intention to place weapons in outer space, as well as deployment of strategic non-nuclear systems of high-precision weapons.

It is notable that these three risks listed in Article 12 come very high on the priority list (points “a”, “c”, and “d”), while “proliferation of weapons of mass destruction, missiles, and missile technologies” is listed as point “f” only, which reflects the hierarchy of threats.

In regard to North Korea, Russia is worried about two possible scenarios, which involve the increase in U.S. military posture on the Korean Peninsula:

1) Deployment of missile-defense systems like THAAD;

2) Reunification of Korea after forced regime change in the DPRK, followed by new deployments of U.S. forces closer to Russia’s (and China’s) border.

To the extent that other options help to preclude U.S. unilateral use of force or additional deployments, Russia sees value in supporting them.

Prestige

National pride concerns positioning Russia as a “great power” on the international stage. The search for international recognition and prestige has become a key driver of Russian foreign policy during Putin’s tenure. Any major international problem is seen by the Kremlin as an opportunity to sit at the table with other key players on the global stage, which shows Russia’s international status as one of the leaders of the international community. This driver is at work in the crisis management effort around the Korean Peninsula. Russia feels that as a geographical neighbor of the DPRK, a UNSC permanent member, and one of the global intellectual leaders on non-proliferation and disarmament issues, it needs to play a role in the settlement.

RUSSIAN ECONOMIC INTERESTS ON THE KOREAN PENINSULA

Russia also has economic interests associated with North Korea, but the official trade volume remains low and continues to decrease. For example, in 2015 the trade volume stood at $83.2 million, with North Korean exports to Russia accounting for $5.7 million, while imports reached $77.5 million. This is a decrease compared to 2014, when the trade figure stood at $92.2 million. The decline was accounted for mostly by exports to Russia (decreased by 43 percent), while imports shrunk by just 6 percent. Below is a breakdown of the trade structure.14

North Korea exports to Russia:

Fish, crustaceans (29 percent)

Articles of apparel, accessories, not knit or crochet (27 percent)

Musical instruments, parts, and accessories (17 percent)

Railway, tramway locomotives, rolling stock, equipment (6 percent)

Manmade filaments (5 percent)

Electrical, electronic equipment (4 percent)

Plastics and articles thereof (3 percent)

Wadding, felt, nonwovens, yarns, twine, cordage, etc. (2 percent)

Rubber and articles thereof (2 percent)

Machinery, nuclear reactors, boilers, etc. (1 percent)

Cereal, flour, starch, milk preparations and products (1 percent)

Tanning, dyeing extracts, tannins, pigments etc. (1 percent)

Milling products, malt, starches, inulin, wheat gluten (1 percent)

Russia exports to North Korea:

Mineral fuels, oils, distillation products, etc. (83 percent)

Wood and articles of wood, wood charcoal (4 percent)

Cereals (4 percent)

Milling products, malt, starches, inulin, wheat gluten (3 percent)

Fish, crustaceans (3 percent)

Pharmaceutical products (1 percent)

Thus, the official trade volume indicates that the DPRK comprises less than 1 percent of Russia’s trade with the outside world. If one takes into account unofficial calculations of trade, which try to figure in trade conducted through third countries, observers arrive at a $1 billion figure.15 Still, with Russian exports in 2016 standing at $285.5 billion, this is a negligible figure for Russia, but not for North Korea.

Much more important in Moscow’s economic calculations are not the existing trade flows and investments, but potential trade flows which might result after implementation of big infrastructure projects. These projects fall into two categories:

1) Trilateral projects, which will link Russia to the ROK through the DPRK, including a trans-Korean railway, gas pipeline, and electricity grid;

2) Russian companies’ participation in development of the DPRK’s natural deposits envisages Russian investment in return for control over North Korean mineral deposits, which would compensate for investment and generate profit. Of the trilateral projects, the railway construction was in the most advanced stage. The Russian Railway has invested about $300 million in rebuilding the link between Rajin port in the DPRK and Khasan, which then is linked to the Trans-Siberian railway. According to the Russian Railways, “Restoration of 54 km railway from the station Khasan to the port of Rajin is positioned as a pilot project for reconstruction of the Trans-Korean Railway.”16 The reconstruction of the railway link and a port terminal took place in 2008-2014, while 2014 and 2015 saw the first commercial North Korean coal shipments to South Korea. The operating capacity of Rajin port (the Russian terminal) is 1.4 million tons, while projected capacity is up to 5 million tons a year. Not surprisingly, this project was one of the victims of UNSC Resolution 2270, and the following resolution made the situation even more severe.17

Two other Trans-Korean projects include building a gas pipeline from Vladivostok to the ROK through the DPRK to be operated by Gazprom, and an electricity grid, in which Russian stateowned InterRAO and FSK companies were interested. These projects were supervised by Ambassador-at-Large Alexander Timonin, who served as Russia’s ambassador to the DPRK (2012-2014) and is currently Russian ambassador in the ROK. According to an interview Timonin gave in 2011,18 Moscow was hoping that the economic revenue that Pyongyang will get through the projects will help to ease tensions on the Korean Peninsula, create interdependence between the two Korean states, and ultimately help in resolving the nuclear issue. However, none of the projects got off the ground, and Seoul’s interest in them decreased after President Park’s election.

There were several projects promoted by the Russian Ministry of Far Eastern Development (MFED), particularly by Minister Alexander Galushka. In 2014 Galushka announced that Russia and the DPRK had reached an agreement on the “Pobeda” project, which envisages construction of 3,000km of railway track in the DPRK by Russian Railways. The construction will be financed by the Russian side. As a return on the investment, Russia was supposed to get licenses for various mineral deposits in North Korea. Galushka estimated the total investment at $25 billion, which would allow an increase in the amount of official bilateral trade to $1 billion a year by 2020.19 These projects never took off the ground, as was the case for another of Galushka’s pet projects – a financial clearinghouse to facilitate transactions between Russia and the DPRK. According to Galushka, up to one third of Chinese exports to the DPRK (estimated at $900 million) are Russian goods, and removing intermediaries will help boost bilateral trade.20 These efforts were part of Russia’s “turn to the East” launched in 2012-2014.21

According to interviews with Russian officials,22 not many in the government believed that the projects developed by Galushka were realistic.23 The motivation of the minister was driven by the fact that he was appointed as chairman of the bilateral intergovernmental commission between Russia and the DPRK. As minister in charge of the Far East development, he managed to secure just this commission, since others were taken by more powerful people (commissions with China, Japan. and the ROK are chaired by deputy prime-ministers). This, according to interviews, forced Galushka to be very active on the North Korean track to get bureaucratic points. However, he failed to involve Russian professionals on the DPRK from the MFA or the intelligence community, who could have helped to check his gigantic projects against North Korean realities, and, thus, arrived at very unrealistic MOUs with Pyongyang. According to several officials, not many people on the top level of the Russian hierarchy believed for a second that the “Pobeda” project was viable. This is why Russia did not even try to find loopholes for its implementation when drafting UNSC resolutions on North Korea.

EFFECTIVENESS OF ECONOMIC SANCTIONS ON THE DPRK: WHAT DOES RUSSIA REALLY THINK?

Measured against the above national interests, Moscow does not see the sanctions as an efficient tool to achieve its interests on the Korean Peninsula. First of all, the sanctions do not provide an ultimate solution to the DPRK missile and nuclear problems. According to Moscow’s analysis, Pyongyang will try to secure the possession of nuclear-capable ICBMs, and the international community has no real tools to prevent it since military tools are not applicable, and since China and Russia will not support crippling sanctions on the DPRK that would enable internal regime change. Secondly, the sanctions do not hinder the U.S. military posture on the Korean Peninsula, including new systems like THAAD. Last, the sanctions, as outlined in Resolutions 2270 and 2321, are strangling Russia’s economic cooperation with the DPRK and hurting existing Russian corporate interests of powerful players like Russian Railways, as well as potential projects of companies such as Gazprom or InterRAO.

There are two additional reasons why Moscow is skeptical about the efficiency of the sanctions. Many Russian analysts agree that despite attempts to strangle the North Korean economy and, thus, change the regime’s behavior, the DPRK is experiencing economic growth right now due to Chinese-style reforms.24 The economy is growing in the range of 2 to 4 percent, supported by the growing private sector and liberalization in some industries, making the Kim regime more sustainable and the government more popular and legitimate. Another reason is Moscow’s changing attitude towards economic sanctions as a tool for coercive diplomacy. Following the Crimea annexation and war in eastern Ukraine, Russia became an object of U.S./EU-led sanctions. Thus, the Russian official narrative about the sanctions is starting to change, as well as Russia’s understanding of the long-term effects of the sanctions for diversification of the economy and regime stability.25

If Moscow thinks that sanctions against North Korea are ineffective and are not helping to promote most Russian national interests on the Korean Peninsula, why is it supporting them, including in the UN? The short answer is because the alternatives are worse, and because UN sanctions are the only mechanism that allows Russia to sit at the table with other players.

First, the alternative to the current policy includes a far more robust American military posture on the Korean Peninsula, or unilateral actions of the United States and its allies to overthrow the Kim regime (including covert operations, sabotage etc.). This is a nightmare scenario, in which Russia’s security interests would be served far worse. Thus, as long as sanctions on the DPRK are a tool to prevent the United States from deploying other options, Moscow is ready to play ball.

Secondly, Russia knows that its tools to influence the situation on the Korean Peninsula are limited. The only real asset it has are diplomatic channels to talk to the North Korean regime. Russia now has, arguably, the best diplomatic relations with the DPRK amid a serious crisis in Beijing’s relations with Pyongyang. However, Moscow is aware that China, not Russia, is a critical player on the peninsula. Since they have many common interests, as long as Moscow can hew to China’s policy, while maintaining its own contacts with Pyongyang, its interests are served. The economic ties to the DPRK are so small that they can be neglected.

Thirdly, the UN sanctions mechanism is the only format of impact on the North Korean missile and nuclear problem that gives Russia a proper seat at the table. All other alternatives, including unilateral economic sanctions, decrease the role of multilateral mechanisms inside the UN system, and, thus, Russia’s role. Since prestige is one of the key drivers of its foreign policy,26 Moscow is supporting the formats that allow it to position itself as an influential global player.

MOVING FORWARD THE RUSSIAN WAY

While not being entirely happy with the sanctions on North Korea, Russia has no other way than to support them and participate in the UN framework to address the DPRK nuclear problem. Russia does not have many tools to influence Pyongyang’s behavior; so it is following China’s lead since the interests of the two powers align on many aspects (particularly, concerns about the U.S. military presence on the Korean Peninsula, THAAD deployment, and fallout from a possible regime collapse if the United States pursues regime change.)

The Russian debate about alternative courses or another set of options that would help to solve the problem and secure Russia’s national interests shows that these options are not there. The official line in Moscow describes the positive scenario as establishment of a new security architecture in Northeast Asia, which would be based on legally binding treaties and resemble, in some aspects, the security architecture in Europe that the Soviet Union and the United States built. “To solve the nuclear problem on the Korean peninsula, we must address its root causes. The discussion must be broadened to questions of reduction of military tensions, demolishing of infrastructure for confrontation, creation of a credible multilateral mechanism for guaranteeing peace and security in North East Asia. This is the only credible way out from the blind alley in the negotiations,” Deputy Minister of Foreign Affairs Igor Morgulov told TASS back in September 2015.27 Moscow’s official line has not changed since. However, Russian efforts to promote this type of vision have found little support so far.

10 Given his background, Toloraya is regarded as one of the leading specialists in Russia on the DPRK. He has served in DPRK twice at the USSR Trade Representative office in the 1980s, was head of the Korea desk at the Russian MFA in 1991-1993, was deputy chief of mission in the ROK in 1993-98, and was deputy head of the Asia Department at MFA in 1998-2003.

11 Audio tape of an event at Carnegie Moscow Center on March 14, 2017.

12 For one of the best assessments of the developments that led to the U.S.-Russia schism see Samuel Charap and Timothy Colton, “Everyone Loses: The Ukraine Crisis and the Ruinous Contest for Post-Soviet Eurasia,” IISS, 2016.

13 “The Military Doctrine of the Russian Federation Approved by the President on December 25, 2014.” The English translation can be found at: http://rusemb.org.uk/press/2029